CGI Inc. Q2 FY2025 earnings call

First Half Results

• Revenue for first half of 2025 was up 6.3% (3% constant) to over $7.8 billion. Adjusted EBIT up 5.3% to $1.28 billion. Adjusted EPS up 7.4% to $4.08. Cash from operations over $2.2 billion trailing 12 months.

Capital Allocation

• Invested $2.3 billion in first half: $183M back into business, $1.6B in acquisitions, $498M in share repurchase, $68M in dividends.

Acquisitions

• Completed 3 acquisitions in Q2: BJSS, Novatec, Momentum Technologies. Announced exclusivity to acquire Apside (over 2,500 professionals to join, deepening presence in multiple regions).

Bookings and Market Insights

• First half bookings $8.6 billion, up $700M y/y. Managed services bookings over $5B (+21% y/y). IP book-to-bill 134% in Q2. Strength in financial services (157% book-to-bill) and government (108%). Client wins included California payroll system, ESA AI project, etc.

In Q2, CGI delivered $4 billion of revenue, up 7.6% year-over-year (3.3% constant currency). Growth was driven by acquisitions and some segments. Constant currency revenue growth in client proximity segments: U.K. and Australia at 12.1% (including BJSS revenue). North American segments grew 7.2% (Aeyon and Daugherty merger impact). North America operation grew 6.4%, Europe 0.7% (softer manufacturing), Asia Pacific 6.8%. Industry-wise, government at 6.5% and financial services at 6.1% led growth. IP revenue was 21.5% of total, down 90 basis points year-over-year due to acquisitions. Bookings were $4.5 billion with a book-to-bill ratio of 112%. North America had a 124% book-to-bill, Europe 101%. Managed services book-to-bill was 122%, SI&C 98%. Global backlog reached $31 billion (2x revenue).

No specific forward-looking guidance provided. Acknowledged dynamic market environment, and noted that guidance isn't given due to the uncertain nature of the environment.

Market Conditions

• Soft market conditions in Continental Europe, particularly in manufacturing, MRD, and telecommunications sectors. SI&C business consulting and system integration had a 98% book-to-bill ratio, indicating softness. ### Restructuring
• Increased scope of restructuring program in Continental Europe, incurring $44M in Q2 with $137M expected in next few quarters, impacting ~1.5% of employees. ### Integration of Acquisitions
• Time required to integrate acquisitions may impact margin in the short term as they are integrated.

Q: How has U.S. Federal contract growth trended since the change in administration?

A: Instead of large renewals, bridge contracts are being signed as clients wait for better understanding of new procurement processes, but key projects like NOTAM system and fraud detection platform are still being pursued.

Q: What conditions make customers return to normal services spend?

A: More certainty about the overall market environment, beyond just tariffs. Signs of market stability in sectors like financial services (e.g., Canada seeing growth as rates dropped) would lead to return to normal spend.

Q: How does the current environment change capital allocation ranking?

A: Creates opportunities on M&A side as some companies face challenges, making them potential targets. CGI has strong balance sheet and free cash flow to pursue accretive acquisitions.

Q: Are there meaningful contract cancellations or non-renewals in U.S. Federal?

A: No meaningful ones to call out.

Q: What's the thought process on transformative acquisitions?

A: Looking at all geographies, with sweet spots in U.S. commercial and Germany. Focused on finding accretive acquisitions that fit CGI's growth strategy